Choosing where to put your retirement savings is just as important as saving in the first place. Your retirement plan determines how much you can contribute, how your money is taxed, what you can invest in, and how flexible your options are over time.

This guide walks through the most common types of retirement plans — whether you're an employee, self-employed, or somewhere in between — to help you find the best fit for your financial future.

401(k) Plans

The 401(k) is the most common employer-sponsored retirement plan. You contribute a portion of each paycheck to your account, and many employers match a percentage of your contributions. In 2025, contribution limits are:

Pros:

Cons:

To maximize your 401(k), contribute enough to receive your employer’s full match and choose investments that align with your goals and risk tolerance. Also, pay attention to your plan’s vesting schedule, which determines when employer contributions become yours to keep.

Tax treatment:
Most 401(k)s are traditional, offering a tax break now and taxable withdrawals later. Roth 401(k)s work in reverse: you pay taxes now, but withdrawals in retirement are tax-free. Choose the one that aligns with your expected tax bracket in retirement.

If you work for a nonprofit, school, or government agency, you may have access to a 403(b) or 457 plan instead of a 401(k). These work similarly, with comparable contribution limits and tax advantages.

Some employers also offer profit-sharing plans, giving them flexibility to contribute based on company performance.

IRAs are retirement accounts you can open on your own through a brokerage. They often provide broader investment options and lower fees than employer-sponsored plans.

2025 Contribution Limits:

Pros:

Cons:

IRAs are ideal for people who want to manage their own investments or supplement an employer-sponsored plan. You can open multiple IRAs, but your total contributions across all accounts can’t exceed the annual limit.

Traditional IRA: Contributions may be tax-deductible, and you pay taxes when you withdraw the money in retirement.

Roth IRA: Contributions are made with after-tax dollars, but withdrawals in retirement are tax-free — including investment gains.

Roth IRAs are generally better if you expect to be in a higher tax bracket in retirement, while traditional IRAs can be useful if you need the tax deduction now.

Self-employed individuals and small business owners have access to specialized retirement plans that offer high contribution limits.

Solo 401(k):
Designed for self-employed individuals with no employees (except possibly a spouse). You can contribute as both employee and employer, allowing for high annual contributions.

SEP IRA:
Simplified Employee Pension plan. Funded solely by employer contributions. Easy to administer and great for sole proprietors or businesses with a few employees.

SIMPLE IRA:
Ideal for businesses with 100 or fewer employees. Requires employer contributions, either matching or fixed.

Keogh Plan:
Less common today, Keogh plans are defined benefit or contribution plans for self-employed individuals, allowing high contribution limits but with more complex administration.

To select the best plan, consider:

There’s no single right choice for everyone. In many cases, a combination of plans — such as a 401(k) at work and a Roth IRA on your own — can offer the best balance of tax advantages and flexibility.

Retirement planning isn’t one-size-fits-all. The key is to understand your options and pick the ones that work for your financial goals and lifestyle. By choosing the right retirement plan and contributing consistently, you’ll give yourself the best chance to retire with confidence and security.

If you’re unsure where to start, speak with a financial advisor who can help you match the right account to your situation. But don’t wait — the sooner you begin, the more time your money has to grow.